LONDON (Reuters) - Tullow Oil Plc TLW.L raised 925 million pounds in a share sale on Wednesday to fund an expansion into developing big oil fields, reducing its focus on more lucrative exploration which propelled its stellar growth.
Aidan Heavey, chief executive of the London-based group, said he needed the money to cover higher than planned capital expenditure in coming years after dropping a plan to sell half its Uganda assets.
“What you’re looking at is the next step up in the business,” Heavey told Reuters in a telephone interview.
Heavey said Tullow hoped to lift oil and gas production to 200,000 barrels of oil equivalent per day in three years, compared with an earlier plan of hitting the target in five years.
Europe’s largest independent oil explorer by market value produced 58,300 boepd in 2009 and plans to produce slightly less in 2010.
Some analysts said Tullow’s move away from the traditional explorer business model of finding reserves -- then selling them to someone with expertise in the less lucrative area of developing projects -- could temper the company’s recent strong growth.
“We believe that Tullow is raising too much money and that this is diluting the exploration upside for shareholders,” Peter Hitchens, oil analyst at brokerage Panmure, said.
Tullow shares fell 4.9 percent to 1,156 pence by 1544 GMT, lagging a 1.4 percent drop in the DJ Stoxx European oil and gas sector index .SXEP.
The company’s shares have tripled in value in the past three years on the back of big finds in Uganda and Ghana.
CONFIDENT OF WINNING BID BATTLE
Tullow had planned to sell half its interests in fields in the Lake Albert basin in Uganda, aiming to attract a partner with the technical expertise to build the pipelines, power plants and other infrastructure needed to bring the fields onstream.
However, when Tullow's partner Heritage Oil HOIL.L agreed to sell its interests to Italian company ENI ENI.MI, Tullow exercised a pre-emption right and now plans to buy and sell on these assets if the government approves the deal.
Despite statements last week from Ugandan Energy Minister Hillary Onek that he backed the ENI bid, Heavey said he was confident Tullow would win the battle. “We expect to get government approval in the coming weeks,” he said.
Heavey said Onek’s comments reflected a “misunderstanding.”
Tullow has proposed to the government bringing in either Chinese oil company CNOOC 0883.HK or France's Total TOTF.PA as a partner to build and manage the pipelines, refinery and power facilities at the Lake Albert fields, Heavey said.
CNOOC and Total declined comment.
Longer term, Tullow could float the Ugandan operations, possibly at the same time as full-scale production comes online in a few years, Heavey said. Tullow’s even larger Ghanaian fields could also be floated at some point, he said.
Such a plan is not unusual for explorers -- Cairn Energy CNE.L for instance spun off its Indian assets, which had propelled it into the FTSE 100 index of Britain's top stocks, into a separate unit in 2006 so it could refocus on exploration.
Heavey said Tullow planned to list its shares on Ugandan and Ghanaian stock markets in the first half of 2010.
Tullow sold 80.4 million new shares, equivalent to 10 percent of the outstanding shares in the company.
William Arnstein, analyst at Jeffries said the company could need to tap the markets again if it wanted to pursue its more development-focussed strategy.
However, Heavey said the cash raised would allow Tullow to bring the Ugandan fields to production, at which point cash flows would cover development costs.
Bank of America Merrill Lynch International and Royal Bank of Scotland’s Hoare Govett acted as joint global co-ordinators and joint bookrunners on the share sale.
Editing by Dan Lalor and David Holmes
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